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FDIC Enforcement Decisions and Orders |
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Civil money penalty assessed against a bank director who was principal shareholder, chairman of the board, and president of the bank, for extensions of credit to the director in amounts exceeding 10% of the bank's capital and unimpaired surplus.
[.1] DirectorsDuties of President and Chairman of the Board
[.2] Civil Money PenaltiesFDIC Authority
[.3] Extension of CreditDefined
[.4] Civil Money PenaltyNotice of Hearing
[.5] Practice and ProcedureHearsayBusiness Records Exception
[.6] Practice and ProcedureHearsayCustodian of Bank Records
[.7] Practice and ProcedureHearsaySpecifically Prepared Documents
[.8] Civil Money PenaltiesAmountStatutory Standard
In the Matter of * * * , DIRECTOR
NOTICE OF ASSESSMENT OF CIVIL
Background
On January 25, 1982, the Board of Directors of the Federal Deposit Insurance Corporation issued a Notice of Assessment of Civil Money Penalty, Findings of Fact and Conclusions of Law, and Order to Pay Civil Money Penalty ("Notice") pursuant to section 18(j)(3) of the Federal Deposit Insurance Act (12 U.S.C. § 1828(j)(3)) against * * * ("respondent"), in his individual capacity while serving as principal shareholder, Chairman of the Board, and President of the Bank of * * *. The Notice charged that Mr. * * * had violated section 22(h) of the Federal Reserve Act, as amended (12 U.S.C. § 375(b)) and Regulation O of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 215). Regulation O was made applicable to state nonmember banks under section 18(j) of the Federal Deposit Insurance Act (12 U.S.C. § 1828(j)).
Findings of Fact
1. The Bank, during all times pertinent to this proceeding, had its principal place of business at * * *, and was a state chartered bank insured by the FDIC but not a member of the Federal Reserve System. (Response of * * * at page 2, par. 1.)
Conclusion of Law
1. The FDIC has jurisdiction over respondent and the subject matter of this proceeding.
[.1] 4. As Chairman of the Board and President of the bank, respondent was responsible for violations of applicable laws and regulations, including section 22(h) of the Federal Reserve Act (12 U.S.C. § 375b) and Regulation O (12 C.F.R. Part 215).
[.2] 7. The FDIC has legal authority to impose a civil money penalty on * * * as a person participating in the affairs of the Bank who caused, brought about, participated in, aided or abetted violations of section 22(h) of the Federal Reserve Act (12 U.S.C. § 375b) and section 215.4(c) of Regulation O (12 C.F.R. § 215.4(c)).
Discussion
The Notice charges that Mr. * * * , through his positions of Chairman of the Board, President, and principal shareholder of the Bank of * * *, violated section 22(h) of the Federal Reserve Act (12 U.S.C. § 375b) and Regulation O of the Board of Governors of the Federal Reserve System
{{4-1-90 p.A-140}}(12 C.F.R. Part 215).4 In essence, Regulation O establishes a limit on the amount of money a bank may lend to its directors, officers, and principal shareholders. FDIC counsel argues that this case involves a willful violation of Regulation O by Mr. * * * which continued for over two years even through Mr. * * * knew that illegal practices were being engaged by him and the Bank.
[.4] Respondent is correct in his conclusion that the Notice does not set forth all of the factual basis for the allegations, but there is no requirement that the FDIC do so. While the Notice is not the model of clarity that FDIC counsels argues it to be, it is adequate to apprise respondent of the charge so that he could prepare his defense. The Notice specifically charges Mr. * * * with violating section 22(h) of the Act and section 214.4(c) of Regulation O in that he borrowed more from the Bank than he was allowed to borrow as an officer and principal shareholder under Regulation O limitations. The Notice states the regulation and statute violated, the nature of the violation, and the period during which the violation occurred.
[.5,.6] The Bank's records (FDIC-1) were introduced through Ms. * * * who was appointed to be liquidator of the bank with the appropriate power of attorney. (FDIC-5, 6, TR 53). At the time of the hearing Ms. * * * was the custodian of the bank's records.9 Under Rule 803(b), records prepared in the regularly conducted course of business may be received into evidence as an exception to the Hearsay Rule if it was the regular practice of the business to prepare such records as shown by the testimony of the custodian or other qualified witness unless there is an indication of lack of trustworthiness. As noted above, Ms. * * * was the custodian of the bank records at the time of the hearing and was a proper person through which to introduce the documents.
[.7] Respondent has also challenged FDIC-7 and 8 on the basis that the exhibits were prepared specifically for this proceeding and do not qualify for admission under the business records exception. Respondent's argument is without merit. It is a common practice of Federal courts and administrative agencies to receive exhibits which summarize data from various documents into a chart format, and it is not a valid argument that such exhibits are specially prepared for a proceeding. It is only required that the exhibit accurately reflect the data taken from the underlying or supporting documents and that opposing parties be permitted access to the underlying or supporting documents of the exhibit.
Assessment of Civil Penalty
[.8] In the Notice, the following order to pay a civil money penalty is provided:
Miscellaneous
On July 9, 1982, FDIC counsel proposed that certain corrections to the record transcript be made. No response was received from respondent. The proposed corrections are approved and have been made in the transcript of this proceeding.
Conclusion
Accordingly, it is recommended that a penalty of $10,000 be assessed against * * * pursuant to section 215.4(c) of Regulation O (12 C.F.R. § 215.4(c) and section 18(j)(3)(A) of the Federal Deposit Insurance Act (12 U.S.C. § 1828(j)(3)(A)). |
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Last Updated 6/6/2003 | legal@fdic.gov |